THE PESO strengthened further against the dollar on Wednesday, posting its best close in over a month, following dovish comments from US Federal Reserve Chair Jerome H. Powell.

The local unit closed at P58.32 per dollar on Wednesday, rising by 12 centavos from its P58.44 finish on Tuesday, Bankers Association of the Philippines data showed.

This was the peso’s strongest finish since its P57.97-per-dollar close on May 28.

The peso opened Wednesday’s session weaker at P58.48 against the dollar. It dropped to as low as P58.50, while its intraday best was at P58.30 versus the greenback.

Dollars exchanged inched down to $1.16 billion on Wednesday from $1.18 billion on Tuesday.

The peso was supported by market expectations of a Fed rate cut by September, the first trader said by phone.

“The peso continued to gain following dovish cues from Mr. Powell’s congressional testimony to the US Senate,” a second trader said in an e-mail.

The US is “no longer an overheated economy” with a job market that has cooled from its pandemic-era extremes and in many ways is back where it was before the health crisis, Mr. Powell said in remarks to Congress that suggested the case for interest rate cuts is becoming stronger, Reuters reported.

Mr. Powell in his prepared remarks told US senators that inflation had been improving in recent months and that “more good data would strengthen” the case for looser monetary policy.

The Fed has kept its policy rate in the 5.25% to 5.5% range since July of 2023.

His remarks appeared to show increasing faith that inflation will return to the Fed’s target, contrasting the lack of progress on inflation in the first months of the year to recent improvement that has helped build confidence that price pressures will continue to diminish.

The Fed receives consumer price information for the month of June on Thursday. The consumer price index (CPI) did not rise at all in May, and analysts anticipate another weak reading later this week.

Following Mr. Powell’s comments, investors continued to put a nearly 70% probability on a Fed rate cut in September, something that would likely require changes to the policy statement to be released after the Fed’s July 30-31 meeting.

For Thursday, the first trader expects the peso to strengthen further as the market awaits the release of June US CPI data. The second trader said Mr. Powell’s testimony to the US House of Representatives overnight could also lift the peso.

The first trader expects the peso to move between P58.20 and P58.50 per dollar on Thursday, while the second trader sees it ranging from P58.15 to P58.40. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort gave a forecast range of P58.25 to P58.45 against the greenback. — AMCS with Reuters